Dave: Over the past couple of weeks I received several phone calls from venture equity GP’s, who have known me for years and with whom both Eastward and I have enjoyed successful long-term co-investment relationships. The comments/questions generally went something like, “Congratulations on the Gilt investment, but what do they have in common with a data storage technology company?”, or “Several of your recent portfolio additions don’t really pertain to the development of differentiable IP!” My answers back were nothing and they don’t, but they all do have some similar characteristics, most importantly strong business models.
For years, Eastward’s investment practice has focused on backing successful entrepreneurs, who have the support of patient, thoughtful and experienced venture equity firms. In some cases, successful investments such as EInk, Cast Iron Systems, Diligent Technologies, Lefthand Networks (from my Ironside days), etc, took multiple rounds of capital and years to develop, market and then effectively sell their products. Commercial success typically required both direct sales efforts initially and the development of multiple channel/system integration partners over time. All the while trying to stay ahead of these same partners from technology development/R & D perspectives, which we all know can be extremely difficult and expensive.
As evidenced by the success of Facebook, Twitter, Groupon, LinkedIn and local companies, such as Constant Contact (will get back to the fact they’re Boston-based shortly), it has become apparent that success is not necessarily determined through coming up with the next great piece of hardware and/or software. The intersection of content and e-commerce, with social networking platforms and relatively ubiquitous high-speed access to the Internet, has created a potent back-drop for new permutations of the companies mentioned (not to mention multiple knock-offs). To my previous point, these companies don’t have to be based in Manhattan or Silicon Valley, as a quick review of our portfolio will show. So check out SonicBids, Auction Holdings, Snagajob and our most recent addition, Karmaloop. If you are an entrepreneur developing next generation clean technology hardware, advanced semiconductors, data center technologies (still one of our favorites), IT enabled services and other traditionally venture-backed technologies, Eastward should still be your go-to firm for equity-sensitive venture debt. Just wanted to point Eastward might be one of the venture debt firms most receptive to new business models too!